"have been estimated by Mr. S. Gurney, at about "4,000,000l., and this acted as effectually as if an "additional issue on securities had been made by the "Bank.

"A resolution was entered into on the 25th of "October, by the court of directors, expressing an "opinion that no deviation from the provisions of the "Act of 1844, regulating the currency was required, "in consequence of any difficulties on the part of the "Bank,' but that they consented to the measure re"commended by Her Majesty's Government, on the "grounds of public necessity urged by the first Lord "of the Treasury and the Chancellor of the Exchequer."

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The first Lord of the Treasury and the Chancellor of the Exchequer preferred public utility to the continuance of the money pressure; the greater the pressure the more invulnerable was the Bank; the country was preferred to the Bank.

"Sect. III. Efficiency of the circulation not iden"tical with its money amount."

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"The inflexible rule, considered to be invariable "and self-acting and adopted by the legislature, as "connected with, and consequent upon the separation "of the departments of issue and of banking, and the regulations provided for both, is founded on cer"tain principles which, before they can be adopted, de"mand very serious examination. The Act appears "to assume that one fixed amount of notes out of the "custody of the Bank, and in the hands of the public, "will at all times produce the same effect, and will be "governed by the same laws. Unless this proposition "be true, the uniform and fixed rules of the Act of "1844 can hardly be justified."

The Committee conclude that "the efficiency of the "circulation cannot be estimated, merely by its "numerical amount," and in confirmation, they adduce the authority of the Bullion Committee, in 1810. "The mere numerical return of the amount of bank

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"notes out in circulation, cannot be considered as at "all deciding the question, whether such paper is or is not excessive. *** The effective currency of the country depends on the quickness of circulation, and "the number of exchanges performed in a given time, "as well as upon its numerical amount; and all the "circumstances which have a tendency to quicken or "to retard the rate of circulation, render the same amount of currency more or less adequate to the "wants of trade. A much smaller amount is required "in a high state of public credit than when alarms "make individuals call in their advances, and provide "against accidents by hoarding, and in a period of commercial security and private confidence, than "when mutual mistrust discourages pecuniary arrangements for any distant time."-Bullion Report.

This "Report" was written in 1810, during the existence of the Bank Restriction Act, but it is equally applicable when the Bank of England pays its notes in cash, it is a principle of universal application; it applies equally to notes payable on demand, and to notes payable after date, or bills of exchange, whether foreign or domestic, to the national coin, to the bullion or money of the great mercantile republic, to every description of money and of credit; and all these several denominations ought to be comprised in the term currency, every medium employed in the transfer of property founded upon confidence in the certainty of the goodness of coins, and upon confidence in the "fortune, probity, and prudence" of those who promise to deliver coin: they constitute the currency of the country, and may all be included in that term as used by the "Committee" in the above just remark, and all ought equally to be emancipated from any inflexible rule.

Mr. Samuel Gurney states:

1116. "The effect of that panic was to cause very general distrust, and a gradual running down of the reserved fund of the Bank as well as of the bullion. After a little time people began to think, under the influence of this panic, how are we to get cir

culating medium? And the wealthy and the more powerful took care very largely to over-provide themselves, and drew upon the reserves of the Bank infinitely beyond the real necessities of the case. The consequence was, that the amount of notes in the hands of the public, amounted to nearly 21,000,000l.; and I have not the slightest doubt that, at that period, at least from four to five millions sterling of the notes issued were locked up and inoperative, in consequence of the alarm and of a fear of not being able to get bank notes at all."

"Many other statements, authorities, and illustra"tions might be given, exemplifying the same principles, and proving the evil consequences of dis"regarding them; but enough has been stated to prove, in the judgment of the Committee, that the "inflexibility of the rule prescribed by the restrictive "clauses of the Act of 1844, is indefensible, when

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equally applied to a state of varying circulation, and "that its enforcement in 1847, was an aggravation "of the commercial distress, and was therefore wisely "set aside by the authority of the Government on the "23rd and 25th of October."

"Sect. IV. Inapplicability of the same rule to periods "of favourable and of adverse foreign exchange."

"The Committee will now proceed to consider an "analogous question; namely, the connexion between "the act and the state of the foreign exchanges. It "will be observed that the two questions of the "efficiency of the circulation, and of the contrast "existing between a favourable and adverse state of "foreign exchange, are intimately connected; inter"nal demand, the hoarding of notes and coin, and "the increase of banking and commercial reserves, "being frequently the concomitants and consequences "of a state of things perfectly compatible with a "favourable foreign exchange."

"In order to make their observations in respect to "the foreign exchanges more intelligible as applied "to the year 1847, it is expedient to bear in mind the "leading facts of the case. Two different periods of pressure occurred in that year, the one in April, the

"other in October. These two periods were clearly "distinguishable. In April the foreign exchanges were adverse, and the Bank was subject to a heavy "drain of gold for export, more especially to the "United States. In October the exchanges were "favourable. Gold was flowing in steadily, and the "advices from abroad showed that more extended "supplies might be depended on. This distinction, "which is of the highest importance, is drawn by the "Governor and Deputy-Governor of the Bank of England."

11. "The pressure in the months of September and October, I consider to be a very different pressure from that in the month of April. That in the month of April arose principally in consequence of the pressure from the export of the precious metals, and the circulation becoming more contracted, whereas I consider that in October to have arisen from a state of panic."

145. "The question refers to the general principles of banking management supposing the Bank were altogether free from the obligations of the Act of 1844, would not you as a banker feel it expedient to act with more caution with respect to your banking reserve at a time when there was a foreign efflux of gold than at a time when gold was coming in? - Decidedly."

"When Mr. Horsley Palmer was asked whether a "different rule ought to be applied to the two cases "under consideration, his answer was as follows :".

731. 732. "Do you, from your experience connected with this subject, conceive that it is defensible in reasoning, or maintainable in practice, that in managing the Bank the same rule should be applied to the case, whether the foreign exchanges be favourable to the country, or adverse to the country?'

"I think it is always in the power of the Bank to protect itself against a foreign demand, but it is totally impossible to protect itself against an internal demand."

"The question is with respect to the restriction imposed upon your issues, for the accommodation of the public, whether you think that it is defensible in theory or maintainable in practice, that you should have the same rule in managing the Bank, when the exchanges are adverse and when the exchanges are favourable? -Certainly not."

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"The observations of Mr. Huskisson were, in like manner, brought under the notice of the Governor

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"giving to those gentlemen the fullest opportunity of explaining how far they adopted or rejected that "authority, as well as of comparing it with the bank'ing transactions of 1817, and with the rule laid "down by the Act of 1844. The evidence stands as "follows: "

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236. 237. "Will you have the goodness to attend to the following passage. Mr. Huskisson states, in his pamphlet on Depreciation, that the consequences of sudden alarm cannot be measured; they baffle all ordinary calculation. Cash is then withdrawn, not because the circulation is excessive, but by the country banks and the town bankers, for the purpose of meeting possible demands upon them, and by the community at large, either directly from the Bank or indirectly through the former channels, for the purpose of hoarding, from the dread of some imaginary or contingent danger.' Does that describe accurately the effect that you think takes place under the circumstances of a panic, as you have interpreted the word?—I think decidedly."

"Then in the same passage, the following sentence succeeds: 'In such a crisis every reduction in the amount of bank paper is so far from checking the drain, that it aggravates the general distress, because the gold which is taken out of the Bank, instead of being substituted in circulation for the notes withdrawn from it, is for the most part locked up, and thus in proportion as the stagnant and straitened circulation wants life and aid, it becomes every day more embarrassed, whilst each new calamity produced by such a state of things contributes to spread and increase the general apprehension.'" Do you agree that under such circumstances the straitening of the circulation (assuming throughout that this is produced by an internal demand and not by a disorganisation of the foreign exchanges) tends, in the words of Mr. Huskisson, to spread and increase the general apprehension, and to make the commercial world more embarrassed?—Yes, I do. And I consider that the Bill has provided a remedy for that, inasmuch as the straitening of the circulation causes a rise in the exchanges, and an importation of the precious metals for the purpose of performing that which an extra issue of notes would have done."

"Mr. Huskisson adds in a passage which was not "read to the Governor of the Bank, 'it is therefore "manifest that by a possible combination of things, "the Bank might be driven to part with its last guinea, "not only without having checked the drain, but with "the certainty of increasing it in proportion as their "notes were diminished.' These latter words are not only "applicable here, but offer an important commentary